Milan and Inter are gearing up for a proposal after rumours filtered through Pepe has refused to renew his contract with Real Madrid.
The Portuguese centre-back has long been a target for Serie A sides, but is now on the market for the summer.
He is in negotiations with Real to extend the contract that expires in June 2012 and requested a salary that matches teammates Mezut Ozil and Karim Benzema.
Instead, the Spanish club have offered €3.5m per season and it's reported the 28-year-old rejected this proposal.
The Corriere dello Sport newspaper suggests this has opened the door for Milan, Inter and possibly Juventus to stage a swoop for Pepe.
He would be available for around €15m plus a salary of €4.5m per season.
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